General Motors reported an 18.5% decline in first-quarter earnings, largely due to job cut costs and slowing new car sales in China.
The decline comes as higher interest rates make new cars more expensive for consumers and persistent concerns about a possible recession in the United States.
GM said its net profit in the first three months of the year fell to $2.4 billion from $2.9 billion in the same period in 2022.
GM Chief Financial Officer Paul Jacobson said on a conference call.
Globally, GM sold 1.4 million vehicles in the first quarter, down 3% from the year-ago quarter. Sales in the US increased by 18% for him, while sales in China decreased by 25% for him.
The automaker’s first-quarter earnings fell by $900 million that GM set aside to cover the cost of severance and other measures resulting from the cut of 5,000 salaried employees. In total, GM is looking to save about $2 billion annually.
According to Jacobson, the benefits of these cost-cutting efforts “are reflected in the bottom line sooner than expected.”
GM lowered its 2023 outlook slightly. The company said it now expects 2023 net income to be between $8.4 billion and $9.9 billion. In January, he ranged from $8.7 billion to $10.1 billion.
The trajectory of the automotive industry remains uncertain. In the US, new car sales increased by about 7% in the first quarter to 3.6 million units. However, the pace of sales slowed markedly by his March. Much of the increase was due to purchases by rental car companies and other commercial fleets rather than individual customers.
Rising interest rates and near-record prices are making it difficult for many US consumers to buy new cars and trucks. Auto buyers paid an average of $48,008 for a new car in March, up about $1,800 from March 2022, according to market researcher Kelly Bluebook. Last month, the average monthly payment for a new car was $784, compared to $683 a year ago.
GM’s U.S. sales increased in the first quarter, but signs of softening consumer demand in the broader market are beginning to emerge. Last week, his AutoNation, the largest U.S. auto retailer, said new car sales were down 2% in the first quarter.
AutoNation CEO Mike Manley said on a conference call, “We believe the mix of economic signals in the market and the automotive retail industry calls for a more cautious approach than in previous years. ‘ said.
GM hopes electric vehicle sales will surge later this year. In the first quarter, the company sold over 20,000 of his EVs in the US. Jacobson said GM expects his EV sales in the first half of this year to exceed 50,000 units and nearly double that in the second half.
“We are pleased with the strong demand for the electric vehicles we produce,” he said.
